Fremont settles with, agrees to pay contractors for over-budget reservoir project

Construction of the upland reservoir began in Fremont in 2011. Estimated at $18 million, the final cost was more than $40 million, which led to legal disputes.

THE BLADE/JEREMY WADSWORTH
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Construction of the upland reservoir began in Fremont in 2011. Estimated at $18 million, the final cost was more than $40 million, which led to legal disputes.

FREMONT -- The city of Fremont has agreed to pay $9.5 million to settle claims over construction of a long-delayed, over-budget reservoir.

Ellis

The project, which swelled in cost from an $18 million estimate to a price tag now in the low $40 million range, became embroiled in legal action after it was dogged by construction problems.

City council on Thursday unanimously agreed to the settlement — the result of mediation among the city; Arcadis U.S. Inc.; Trucco Construction Co. Inc., and H.M. Miller Construction Co. The agreement obligates the city to pay Trucco, the original project contractor, $2.7 million.

The city also agreed to pay Miller, the second contractor on the project, $6.75 million, although that payment is contingent on the city getting a long-term loan from the state to pay the bill.

Arcadis, the city’s engineering firm, will pay the city $1.5 million toward the settlements; waive its $550,000 fee claim for services provided; and supply the next $10,000 in project services to the city at no cost. Arcadis spokesman Debra Havins said the Colorado-based company would not comment “on pending legal matters.”

All parties agreed to the terms, but final language will be hammered out in coming weeks, said Mayor Jim Ellis, who called it a “done deal.” He campaigned in 2011 on promises to bring more transparency to the reservoir project and said the settlement allows the city “to close this unfortunate chapter in its history.”

“You always look at what is the alternative to a settlement, and our alternative was three lawsuits consuming the city for the next many years and substantially more in attorneys’ fees and costs. So now hopefully we will put this behind us and go on with the reservoir and start using it,” he said.

The city racked up about $1.3 million in attorney fees related to the project, he said. To cover settlement costs and loan repayment, it will tap into various funds and increase water rates again next year, likely by a double-digit percentage, he said.

Fremont decided to build the reservoir in 2008 as an alternate drinking water supply after the Ohio Environmental Protection Agency told the city to resolve periodically high nitrate levels from the Sandusky River. But problems with the soil composition and a porous karst bedrock that threatened to drain the reservoir waylaid progress and upped the cost.

The project, located off Sandusky County Road 41, is “substantially completed” and a liner system, which contributed to the increased cost, is installed, Mr. Ellis said. The city awaits state review before filling the reservoir, and it could be in use by summer.

Ohio EPA fined the city $6,400 after it missed a May, 2012, project deadline, which had been extended previously, agency spokesman Dina Pierce said.

The city terminated its contract with Delaware, Ohio, contractor Trucco after the project was redesigned and the city rebid the project, Mr. Ellis said. The city paid Trucco more than $3 million for work done and arrived at the additional settlement amount “by negotiation,” he said.

Attorney Peter Welin, who represents Trucco, said the $2.7 million settlement from the city reimburses the company for the cost of its work.

“It is the end of a long road, and they are glad to put it behind them, knowing that they did good work and [are] finally getting paid for it,” Mr. Welin said.

H.M. Miller Construction Co. of Mogadore, Ohio, became the project contractor after placing the low bid after the project redesign, Mr. Ellis said. The project ran into more problems related to the porous rock and other delays, and the cost increased, he said. The settlement resolves a dispute over how much Miller is to be paid. Mr. Ellis said the $6.75 million settlement is in addition to roughly $18 million the city has paid or committed to pay the company. Attorneys for Miller could not be reached for comment.

The city expects funds to come from a loan through the Ohio Water Development Authority, which already provided loans to cover more than half the project’s total cost. Authority Executive Director Steve Grossman said the EPA must review an application for additional dollars, which is “very likely” to be approved.

“It is payment for work that is actually done,” said Mr. Ellis, who said Miller provided documentation showing it is not recovering all its costs.

Settlement terms also call for all parties to agree to “a reasonable nondisparagement and confidentiality clause” and for the legal actions to be dismissed with prejudice.

Staff writer Jennifer Feehan contributed to this report.

Contact Vanessa McCray at: vmccray@theblade.com or 419-724-6065.